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Sprint Corp (NYSE:S) stockholders are on pins and needles, waiting for the wireless telecommunications giant to report second quarter earnings results Tuesday morning. Sprint not only must show tons of growth momentum Tuesday, the company must issue confident guidance if S stock — down 11% in the past six months — is to get out of its rut.
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But will the company deliver? With better-than-expected earnings results already in hand from T-Mobile US Inc (NASDAQ:TMUS), as well as larger rivals AT&T Inc. (NYSE:T) and Verizon Communications, Inc. (NYSE:VZ), S stock holders are wondering is there any growth left for Sprint, given how highly competitive the U.S. wireless industry has become?
Once thought to be on the verge of bankruptcy, Sprint has turned itself around and has become an acquisition target, thanks to the strong operational improvements under the leadership of CEO Marcelo Claure. The company has reversed its customer losses not only because of aggressive marketing tactics, but also because of its improving wireless network.
Reports now suggest that the nation’s fourth-largest wireless carrier could be taken out by either Comcast Corporation (NASDAQ:CMCSA) or Charter Communications, Inc. (NASDAQ:CHTR). Those rumors are on top of continuing merger chatter with TMUS.
To be sure, Softbank Corp. (Japan) (OTCMKTS:SFTBY) founder Masayoshi Son, who owns 80% of Sprint, has shown he’s in no rush to sell his golden goose. But for any of these M&A talks to carry weight, Sprint must continue to grow subscribers and, just as important — if not more so — profits. And the company must do this as the U.S. now boasts a high wireless penetration of 95%, suggesting meaningful saturation.
Whispers of Break Even
For the three months that ended June, Wall Street expect Sprint to lose a penny per share on revenue of the $8.24 billion. This compares to the year-ago quarter when the company lost 46 cents per share on $8.84 billion in revenue. Meanwhile, the so-called “whisper number” expects Sprint to deliver a break even quarter, which would mark a drastic financial improvement in one year.
In the fourth quarter, Sprint reported a loss of 7 cents ashare on revenue of $8.5 billion, wider than the 4 cents Wall Street was looking for. But Sprint stock rose more than 4% on a strong revenue beat. That Sprint added 187,000 new wireless customers, while lowering its churn (customer cancellations) rate to 1.75% underscores the improvement of its wireless network.